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What Is Medicare ASP?

All health plans used to use the average wholesale price (AWP) method for determining the cost of office-administered drugs. Due to increasing legal scrutiny of AWP conduct, the Medicare Modernization Act switched Medicare Part B payments to the average sales price method, or ASP, in 2005.

  1. The NDC

    • Manufacturers report the ASP by using national drug codes (NDC), or 11-digit codes that identify the manufacturer, the product dosage form and the package size of the drug. Manufacturers have to report the ASP and the sales volume for every NDC to the Centers for Medicare & Medicaid Services (CMS) on a quarterly basis.

    The HCPCS

    • The CMS uses a system called the Healthcare Common Procedure Coding System (HCPCS) to standardize coding for specific health care services and items. The HCPCS uses NDC information to calculate these standards. The Medicare ASP pays out 106 percent of the volume-weighted ASP for the HCPCS codes, not the NDC.

    Benefits

    • A Medicare Payment Advisory Commission (MedPAC) report to Congress in January 2007 that switching to Medicare ASP resulted in Part B drug expenses decreasing more than $800 million from 2004 to 2005. The savings come from the end of manufacturers marking up prices under the AWP method.

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